Does Texas Tax Tips in 2026?

What Texas Tipped Workers Owe in 2026

The State Tax Saving — What It Actually Equals

The value of Texas's no-state-tax advantage depends entirely on what you'd pay in the alternative state. These are state tax rates only — not total take-home estimates:

State income tax only. Effective rates at typical server income levels — actual rate depends on total income. Does not include federal tax or FICA.

The Base Wage Context

Texas's zero state tax benefit must be weighed against the base wage structure. These are published minimum wage figures — not income estimates:

A Texas employer can legally pay $2.13/hr as long as tips bring the worker to $7.25/hr. The employer must make up any shortfall. Source: U.S. Department of Labor, state labor departments.

How the OBBBA Changes Texas Taxes in 2026

Before the OBBBA, all tip income above the standard deduction was subject to federal income tax. In 2026, up to $25,000 in qualified tips is deducted from federal AGI first, significantly lowering the federal tax owed on tips for most Texas workers. FICA remains unchanged.

• Tips up to $25,000 (qualified): deducted from federal AGI — no federal income tax on that portion
• Tips above $25,000: taxed at ordinary federal rates (10%–22% for most workers)
• FICA (7.65%): applies to all tips, including the exempt portion — this is a common misunderstanding
• State tax in Texas: $0 on all tips regardless of amount

Calculate Your Texas Take-Home

Your actual take-home depends on your total income, tip volume, filing status, and any pre-tax deductions. Use the calculator for a number specific to your situation:

FAQs: Tips and Taxes in Texas (2026)

Does Texas tax tip income in 2026?

No. Texas has no state income tax. All tip income is completely free of state-level taxation. Tipped workers only pay federal income tax (reduced by the OBBBA exemption) and FICA (7.65%).

What is the tipped minimum wage in Texas?

Texas follows the federal tipped minimum wage of $2.13/hr — the federal floor. If tips don't bring a worker to $7.25/hr total, the employer makes up the difference. Texas has not raised its minimum wage above the federal floor.

How does the OBBBA tip exemption work in Texas?

The OBBBA exempts up to $25,000 in qualified tips from federal income tax for workers earning under $160,000/year. In Texas, there's no state tax clawback — the full federal benefit passes through. FICA (7.65%) still applies to all tips.

Do Texas cities have a city income tax on tips?

No. No Texas city — including Houston, Dallas, San Antonio, Austin, or Fort Worth — imposes a city income tax. Texas law prohibits local income taxes.

What happens to tips above the $25,000 OBBBA threshold?

Tips above $25,000 are taxed at ordinary federal income tax rates (10%–22% for most workers). In Texas, there is no additional state tax on any amount of tips.

How do tip-out pools affect taxable income in Texas?

Tip-outs you pay to support staff reduce your reportable tip income for federal income tax purposes — you pay income tax on tips you keep, not gross tips before tip-out. However, FICA is calculated on your gross tips before the tip-out deduction.

Is Texas actually the best state for tipped workers?

For zero state income tax, yes — tied with eight other no-income-tax states. But Texas's $2.13/hr tipped minimum wage is among the lowest base wage floors in the US. Workers in high-tip establishments benefit significantly from no state tax; workers in lower-volume environments may earn more total in states with higher minimum wages, even with a state income tax.